This page has been archived and commenting is disabled.

Why It Really All Comes Down To The Death Of The Petrodollar

Tyler Durden's picture




 

Last week, in the global currency war’s latest escalation, Kazakhstan instituted a free float for the tenge. The currency immediately plunged by some 25%. 

The rationale behind the move was clear enough. The plunge in crude prices along with the relative weakness of the Russian ruble had severely strained Kazakhstan, which is central Asia’s largest crude exporter. As a quick look at a chart of the tenge’s effective exchange rate makes clear, the pressure had been mounting for quite a while and when China devalued the yuan earlier this month, the outlook for trade competitiveness worsened. 

What might not be as clear (on the surface anyway) is how recent events in developing economy FX markets following the devaluation of the yuan stem from a seismic shift we began discussing late last year - namely, the death of the petrodollar system which has served to underwrite decades of dollar dominance and was, until recently, a fixture of the post-war global economic order. 

In short, the world seems to have underestimated how structurally important collapsing crude prices are to global finance. For years, producers funnelled their dollar proceeds into USD assets providing a perpetual source of liquidity, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop. That all came to an abrupt, if quiet end last year when a confluence of economic (e.g. shale production) and geopolitical (e.g. squeeze the Russians) factors led the Saudis to, as we put it, Plaxico'd themselves and the US.

The ensuing plunge in crude meant that suddenly, the flow of petrodollars was set to dry up and FX reserves across commodity producing countries were poised to come under increased pressure. For the first time in decades, exported petrodollar capital turned negative. 

That set the stage for a prolonged downturn in emerging market currencies, and as worries about China’s economy - the engine of global growth and trade - grew, so did the pressure.

Thus when Beijing moved to devalue the yuan, it drove a stake through the heart of the EM world by simultaneously i) validating concerns about weak Chinese growth, thus guaranteeing further pressure on commodities, ii) delivering a staggering blow to the export competitiveness of multiple emerging economies, iii) depressing demand from the mainland by making imports more expensive. Thanks to the conditions that resulted from the death of the petrodollar (e.g. falling FX reserves and growing fiscal headwinds), the world’s emerging markets were in no position to defend themselves against the fallout from the yuan devaluation. Complicating matters is a looming Fed hike. Included below is a look at flows into (or, more appropriately, "out of") EM bonds. As Barclays notes, the $2.5 billion outflow in the week to August 21 is the highest level since February of last year. 

We are, to put it mildly, entering a not-so-brave new world and the shift was catalyzed by the dying petrodollar. Kazakhstan’s move to float the tenge is but the beginning and indeed Kazakh Prime Minister Karim Massimov told Bloomberg on Saturday that the world has entered "a new era" and that soon, any and all petro currency dollar pegs are set to fall like dominoes. Here’s more:

Currency pegs in crude-producing nations are set to topple as the world enters a “new era” of low oil prices, according to the prime minister of Kazakhstan, which rattled markets this week with a surprise decision to abandon control of its exchange rate.

 

"At the end of the day, most of the oil-producing countries will go into the free floating regime,” including Saudi Arabia and the United Arab Emirates, Karim Massimov said in an interview on Saturday in the capital, Astana. "I do not think that for the next three to five, maybe seven years, the price for commodities will come back to the level that it used to be at in 2014."

 

Central Asia’s biggest energy producer cut its currency loose on Thursday, triggering a 22 percent slide in the tenge to a record low versus the dollar. The move followed China’s shock devaluation of the yuan the week before, which drove down oil prices on concern global growth will stutter and nudged nations with managed exchange rates toward competitive devaluations of their own.

 

More than $3.3 trillion has been erased from the value of global equities after China’s decision spurred a wave of selling across emerging markets. Brent crude touched a six year-low of $45.07 per barrel on Friday, while the Dow Jones Industrial Average entered a correction.

 

“After I watched what is happening on the financial market and stock market in the U.S. on Friday night, I thought that we did it at the right time,” Massimov, 50, said in his office in the government’s headquarters. The decision avoided “big speculation and pressure this weekend in Kazakhstan,” he said.

 

The central bank spent $28 billion this and last year to support the tenge, including $10 billion in 2015, Kazakh President Nursultan Nazarbayev said this week. After its slump on Thursday, the currency rallied 7.4 percent to close at 234.99 against the dollar a day later. The country’s dollar bonds due July 2025 climbed after the announcement, lowering the yield nine basis points to 5.74 percent in the last two days of the week.

 

Before the currency shift, Kazakhstan was at a competitive disadvantage to Russia, its neighbor and top trading partner along with China. The tenge had fallen by only 7.6 percent against he dollar in the 12 months up to Aug. 20, compared with a 46 percent depreciation for the ruble, while crude had plummeted 55 percent in the period.

We discussed this in great detail on Friday (with quite a bit of color on the fiscal impact for Saudi Arabia) and we've included a chart from Deutsche Bank which should have some explanatory and predictive value below, but the big picture takeaway is that the world is now beginning to feel the impact of the petrodollar's quiet demise, and because this is only the beginning, we've included below the entire text of the petrodollar's obituary which we penned last November .

*  *  *

How The Petrodollar Quietly Died And Nobody Noticed

Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company - the end of the system that according to many has framed and facilitated the US Dollar's reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop.

The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, "developed world" status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements, leading to, among other thing, such discussions as, in today's FT, why China's Renminbi offshore market has gone from nothing to billions in a short space of time.

And yet, few would have believed that the Petrodollar did indeed quietly die, although ironically, without much input from either Russia or China, and paradoxically, mostly as a result of the actions of none other than the Fed itself, with its strong dollar policy, and to a lesser extent Saudi Arabia too, which by glutting the world with crude, first intended to crush Putin, and subsequently, to take out the US crude cost-curve, may have Plaxico'ed both itself, and its closest Petrodollar trading partner, the US of A.

As Reuters reports, for the first time in almost two decades, energy-exporting countries are set to pull their "petrodollars" out of world markets this year, citing a study by BNP Paribas (more details below). Basically, the Petrodollar, long serving as the US leverage to encourage and facilitate USD recycling, and a steady reinvestment in US-denominated assets by the Oil exporting nations, and thus a means to steadily increase the nominal price of all USD-priced assets, just drove itself into irrelevance.

A consequence of this year's dramatic drop in oil prices, the shift is likely to cause global market liquidity to fall, the study showed.

This decline follows years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.

But no more: "this year the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations."

In short, the Petrodollar may not have died per se, at least not yet since the USD is still holding on to the reserve currency title if only for just a little longer, but it has managed to price itself into irrelevance, which from a USD-recycling standpoint, is essentially the same thing.

According to BNP, Petrodollar recycling peaked at $511 billion in 2006, or just about the time crude prices were preparing to go to $200, per Goldman Sachs. It is also the time when capital markets hit all time highs, only without the artificial crutches of every single central bank propping up the S&P ponzi house of cards on a daily basis. What happened after is known to all...

"At its peak, about $500 billion a year was being recycled back into financial markets. This will be the first year in a long time that energy exporters will be sucking capital out," said David Spegel, global head of emerging market sovereign and corporate Research at BNP.

 

Spegel acknowledged that the net withdrawal was small. But he added: "What is interesting is they are draining rather than providing capital that is moving global liquidity. If oil prices fall further in coming years, energy producers will need more capital even if just to repay bonds."

In other words, oil exporters are now pulling liquidity out of financial markets rather than putting money in. That could result in higher borrowing costs for governments, companies, and ultimately, consumers as money becomes scarcer.

Which is hardly great news: because in a world in which central banks are actively soaking up high-quality collateral, at a pace that is unprecedented in history, and led to the world's allegedly most liquid bond market to suffer a 10-sigma move on October 15, the last thing the market needs is even less liquidity, and even sharper moves on ever less volume, until finally the next big sell order crushes the entire market or at least force the [NYSE|Nasdaq|BATS|Sigma X] to shut down indefinitely until further notice. 

So what happens next, now that the primary USD-recycling mechanism of the past 2 decades is no longer applicable? Well, nothing good.

Here are the highlights of David Spegel's note Energy price shock scenarios: Impact on EM ratings, funding gaps, debt, inflation and fiscal risks.

Whatever the reason, whether a function of supply, demand or political risks, oil prices plummeted in Q3 2014 and remain volatile. Theories related to the price plunge vary widely: some argue it is an additional means for Western allies in the Middle East to punish Russia. Others state it is the result of a price war between Opec and new shale oil producers. In the end, it may just reflect the traditional inverted relationship between the international value of the dollar and the price of hard-currency-based commodities (Figure 6). In any event, the impact of the energy price drop will be wide-ranging (if sustained) and will have implications for debt service costs, inflation, fiscal accounts and GDP growth.

Have you noticed a reduction of financial markets liquidity?

Outside from the domestic economic impact within EMs due to the downward oil price shock, we believe that the implications for financial market liquidity via the reduced recycling of petrodollars should not be underestimated. Because energy exporters do not fully invest their export receipts and effectively ‘save’ a considerable portion of their income, these surplus funds find their way back into bank deposits (fuelling the loan market) as well as into financial markets and other assets. This capital has helped fund debt among importers, helping to boost overall growth as well as other financial markets liquidity conditions.

Last year, capital flows from energy exporting countries (see list in Figure 12) amounted to USD812bn (Figure 3), with USD109bn taking the form of financial portfolio capital and USD177bn in the form of direct equity investment and USD527bn of other capital over half of which we estimate made its way into bank deposits (ie and therefore mostly into loan markets).

The recycling of petro-dollars has benefited financial markets liquidity conditions. However, this year, we expect that incremental liquidity typically provided by such recycled flows will be markedly reduced, estimating that direct and other capital outflows from energy exporters will have declined by USD253bn YoY. Of course, these economies also receive inward capital, so on a net basis, the additional capital provided externally is much lower. This year, we expect that net capital flows will be negative for EM, representing the first net inflow of capital (USD8bn) for the first time in eighteen years. This compares with USD60bn last year, which itself was down from USD248bn in 2012. At its peak, recycled EM petro dollars amounted to USD511bn back in 2006. The declines seen since 2006 not only reflect the changed  global environment, but also the propensity of underlying exporters to begin investing the money domestically rather than save. The implications for financial markets liquidity - not to mention related downward pressure on US Treasury yields – is negative.

* * *

Even scarcer liquidity in US Capital markets aside, this is how BNP sees the inflation and growth for energy exporters:

Household consumption benefits: While we recognise that the relationship is not entirely linear, we use inflation basket weights for ‘transportation’ and ‘household & utilities’ (shown in the ‘Economic components’ section of Figure 27) as a means to address the differing demand elasticities prevalent across countries. These act as our proxy for consumption the consumption basket in order to determine the economic benefit that would result as lower energy prices improve household disposable income. This is weighted by the level of domestic consumption relative to the economy, which we also show in the ‘Economic components’ section of Figure 27.

Reduced industrial production costs: Outside the energy industry, manufacturers will benefit from falling operating costs. Agriculture will not benefit as much and services will benefit even less.

Trade gains and losses: Lost trade as a result of lower demand from oil-producing trade partners will impact both growth and the current account balance. On the other hand, better consumption from many energy-importing trade partners will provide some offset. The percentage of each country’s exports to energy producing partners represents relative to its total exports is used to determine potential lost growth and CAR due to lower demand from trade partners.

Domestic FX moves are beyond the scope of our analysis. These will be tied to the level of openness of the economy and the impact of changed demand conditions among trade partners as well as dollar effects. Neither do we address non-oil related political risks (eg sanctions) or any fiscal or monetary policy responses to oil shocks.

GDP growth

The least impacted oil producing country, from a GDP perspective, is Brazil followed by Mexico, Argentina, Tunisia and Trinidad & Tobago. The impact on fiscal accounts also appears lower for these than most other EMs.

Remarkably, the impact of lower oil for Russia’s economic growth is not as severe as might be expected. Sustained oil at USD80/bbl would see growth slow by 1.8pp to 0.6%. This compares with the worst hit economies of Angola (where growth is nearly 8pp lower at -2%), Iraq (GDP slows to -1.6% from 4.5% growth), Kazakhstan and Azerbaijan (growth falls to -0.9% from 5.8%).

For a drop to USD 80/bbl, it can be seen (in Figure 27) that, in some cases, such as the UAE, Qatar and Kuwait, the negative impact on GDP can be comfortably offset by fiscal stimulus. These economies will probably benefit from such a policy in which case our ‘model-based’ GDP growth estimate would represent the low end of the likely outcome (unless a fiscal policy response is not forthcoming).

Global growth in 2015? More like how great will the hit to GDP be if oil prices don't rebound immediately?

On the whole, we can say that the fall in oil prices will prove negative, shaving 0.4pp from 2015 EM GDP growth. The collective current account balance will fall 0.58pp to 0.6% of GDP, while the budget deficit will deteriorate by 0.61pp to -2.9%. This probably has the worst implications for EM as an asset class in the credit world.

Energy exporters will fare worst, with growth falling by 1.9pp and their current account balances suffering negative pressure to the tune of 2.69pp of GDP. Budget balances will suffer a 1.67pp of GDP fall, despite benefits from lower subsidy costs. The impact of oil falling USD 25/bbl will be likely to put push the current account balance into deficit, with our analysis indicating a 0.3% of GDP deficit from a 2.4% surplus before. Fortunately, the benefit to inflation will be the best in EM and could help offset some of the political risks from reduced growth.

As might be expected, energy importers will benefit by 0.4pp better growth in this scenario. Their collective current account will improve by 0.6pp to 1.1% of GDP.

The regions worst hit are the Middle East, with GDP growth slowing to 0.3%, which is 3.8pp lower than when oil was averaging USD105/bbl. The regions’ fiscal accounts will also suffer most in EM, moving from a 1.7% of GDP surplus to a 1.8% deficit. Meanwhile, the CAB will drop 5.3pp, although remain in surplus at 3.9%. The CIS is the next-worst hit, from a GDP perspective, with regional growth flat-lined versus 1.91% previously. The region’s fiscal deficit will worsen from 0.7% of GDP to -1.8% and CAB shrink to 0.7% from 3% of GDP. Africa’s growth will come in 1.4pp slower at 2.8% while Latam growth will be 0.4pp slower at 2.2%. For Africa, the CAB/GDP ratio will fall by 2.4pp pushing it deep into deficit (-2.9% of GDP).

Some regions benefit, however, with Asia ex-China growing 0.45bpp faster at 5.5% and EM Europe (ex-CIS) growing 0.55pp faster at 3.9%, with the region’s CAB/GDP improving 0.69pp, although remain in deficit to the tune of -2.4% of GDP.

And so on, but to summarize, here are the key points once more:

  • The stronger US dollar is having an inverse impact on dollar-denominated commodity prices, including oil. This will affect emerging market (EM) credit quality in various ways.
  • The implications of reduced recycled petrodollars has significant ramifications for financial markets, loan markets and Treasury yields. In fact, EM energy exporters will post their first net drain on global capital (USD8bn) in eighteen years.
  • Oil and gas exporting EMs account for 26% of total EM GDP and 21% of external bonds. For these economies, the impact will be on lost fiscal revenue, lost GDP growth and the contribution to reserves of oil and gas-related export receipts. Together, these will have a significant effect on sustainability and liquidity ratios and as a consequence are negative for dollar debt-servicing risks and credit ratings.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 08/22/2015 - 22:05 | 6456966 Ms No
Ms No's picture

The price of oil has been yanked from 35 - 140 a damn barrel this type of instability was the supposed reasoning behind the creation of the Federal Reserve to begin with.... FAIL!  It's time to start over. 

The petro dollar was most likely never a fair creation to begin with but it was an incredible gift and advantage that was in theory (yeah I know) entrusted to the US because of our sound money and fiscal conservatism. The PD is not dying a natural death it is being murdered.  It is pretty doubtful that once it is gone that it will ever be recovered.  Who will answer for this?  Let us guess... China & Russia? 

Sat, 08/22/2015 - 22:07 | 6456971 llessur_one
llessur_one's picture

So oil companies used to get 80 or so dollars a barrel for oil and what ever their profits were went into the banking system so the bankers put that money into a pile and acted like pigs in shit. Now oil is half that and profits are drying up where will the bankers get their next pile of Shit?

Sat, 08/22/2015 - 22:24 | 6456995 F0ster
F0ster's picture

They already got it... Your Retirement Accounts

Sat, 08/22/2015 - 23:49 | 6457101 q99x2
q99x2's picture

Yep, but can they keep it. They have made the populations of the US, the EU, Australia and Japan their enemies and Russia, China and the mid-east. The bankers are doomed once the military wakes up. And the military will wake up because they are going to run out of operating expenses. Banksters are toast.

We will come rejoicing bringing in the thieves.

Anyhow here is what is happening. http://www.eliasound.biz/hulet/mp3s/2015/07.21.15.mp3

Sat, 08/22/2015 - 23:24 | 6457066 GeorgeHayduke
GeorgeHayduke's picture

Drug money. But they have to keep that under the table.

Sat, 08/22/2015 - 22:10 | 6456975 The Whistleblowers
The Whistleblowers's picture

A music interlude to the Economic Collapse

https://www.youtube.com/watch?v=cpiz2-0eDy0

 

Sat, 08/22/2015 - 22:52 | 6457028 MaxThrust
MaxThrust's picture

What ever is going to happen the TPTB wrote the story years ago.

Sat, 08/22/2015 - 23:03 | 6457043 kchrisc
kchrisc's picture

The plan is for Zion and their grifting banksters to engineer the collapse of the "petrodollar," so as to profit from its demise, as they profited from its build up.

They will then take up the euro while foisting an SDR backed fiat-currency upon the American people. In this way they will be able to continue to squeeze blood, debt service, from the stone that will be the destitute American people.

So, just Stop paying so as to undermine their fiat-debt based empire, keep stacking, and keep your powder dry.

See you one the battlefield, or screaming from one of Zion's Room 101s.

Zion is a scheme, not an ethnicity.

Sat, 08/22/2015 - 23:22 | 6457063 falconflight
falconflight's picture

"The plan is for Zion and their grifting banksters to engineer the collapse of the "petrodollar," so as to profit from its demise, as they profited from its build up."

So the NWOzios are now shorting themselves?  What changed their minds?  They gots PutzPutin and PRC by the short hairs?  Well, could be cause Joooos are Masters of the Universe (And Univision) You win the most comically contradictory troll award of the week.  Shaaaaalom buby.

Sun, 08/23/2015 - 03:15 | 6457264 Barley Burnside
Barley Burnside's picture

Please,,, you ever hear of a slave labor force going bankrupt?? They will feed and coddle us for as long as they need us, robotics and ai,, will be the norm, useless eaters by the billions will be terminated, skynet,

Sun, 08/23/2015 - 08:00 | 6457407 Oldwood
Oldwood's picture

I concur...I think.

As a small business owner/manufacturer I can say that with a handful of employees who I see nearly as family, the prospect of replacing them with automation looks prettier every day. Employees are the biggest pain in the ass, the biggest inhibitor to growth on the planet....except they ARE the planet in regards to the economy.

We watch as everyone's inclination to work, to actually expend effort to achieve is eroding, while their desire...their needs, have only grown. Think what you want of our current "slavery", it is we who enslave ourselves, as any addict does.

We watch as our concept of freedom has changed from accountability to entitlement, from rights of ownership of our productivity to entitlement to tap the productivity of the collective.

We watch as the concept of prosperity through productivity is replaced with the prosperity of debt or speculation, and yet we wonder why we are failing. Of course we KNOW why we are failing. We are FAILING because of someone else, some evil banker or joo who tricked us. Yes, we have been lied to, manipulated and deceived, just as we always have been since our first ability to communicate.

As many here have bemoaned for years, our problem is hinged upon delusion, but I fear it is we who are as deluded as anyone. Our problem is not the joos or the bankers. It is US...we...the people, who will suck onto the first easy tit that comes along. We can blame those who seek to profit from our weakness, just as we would want to prosecute those who seek to bribe our leaders, but until we recognize that that element will always be with us and that the only real defense against it is our own intelligence and willingness to deny ourselves the delusion of something for nothing.

We love the "benefits" that we attribute to a free economy without ever accepting that we have really never had one and that these benefits are largely the result of the corruption and manipulation we all claim to abhor. We have experienced the high of this "creation" and now faced with the morning after find ourselves demanding the high again without willingness to accept either the consequences OR the reality of our addiction. Yes, the "dealer" is highly profitable and as such hated, but we want and NEED what he is selling.

The solutions lie within ourselves, and that is not through hanging bankers and such, or even replacing them with more morally superior equivalents. It is accepting responsibilities for our own actions, the first of which is that we have been had....again, and that we have a problem with our "addictions".

Reality sucks...get over it.

Sun, 08/23/2015 - 08:56 | 6457451 A82EBA
A82EBA's picture

+1000

Sun, 08/23/2015 - 09:52 | 6457544 amadeus39
amadeus39's picture

the addiction is instant gratification versus delayed gratification. If you have to borrow money now...don't. Pay with money you have saved. The only time you should borrow from the banksters is if you feel you can make more money with their money. And you had better be right about that. There is no substitute for being right.

Sat, 08/22/2015 - 23:23 | 6457049 MagicMoney
MagicMoney's picture

Well if you look at the US dollar index, the US currency is valued very highly at 94.80. Use to be higher until recently, but based on what? A economic recovery? A economy that is healthy enough to march on up to 6% federal funds? I mean the dollar index in itself is pretty suspicious. Peter Schiff seems to think that the US dollar is in a confidence bubble right now and that the Chinese see that and that's why it removed the peg to reflect fundamentals. Free to float policy just like Kazakstan.

 

The devaluation reflects the rest of the global market, not the US. A dollar peg to to a fast rising USD does not reflect fundamentals. If this is true, then it's the US dollar peg doesn't seem logical.  US dollar is unstable for a peg, so it seems certain currency policies are detaching from what could be seen as a US dollar problem of instability. While the US dollar is riding high right now, if events in the US sour and how the fed decision day is interpreted, then the US dollar confidence bubble gets corrected. US dollar falls relative to EM currencies. 

However will EMs reinvest into US financial markets? Who knows? But i think the Petrodollar's time is limited and may be on the way out just as this article points out.

Sun, 08/23/2015 - 11:34 | 6457727 Central Bankster
Central Bankster's picture

"King Dollar" is acting well because it is still the world reserve currency.  Until this changes, all types of financial panics will see inflows to the dollar as a "safety" trade.  You will know its the begining of the end of the "king dollar" when financial panics result in falling dollar/rising rates on treasuries.  We just aren't there yet.  But yes, eventually it will end.

 

 

Sat, 08/22/2015 - 23:21 | 6457061 Solio
Solio's picture

Who's gets the organs?

Sat, 08/22/2015 - 23:52 | 6457107 holdbuysell
holdbuysell's picture

Looks like Jim Willie has nailed this. The USD will rise to its own demise.

Sun, 08/23/2015 - 09:03 | 6457468 A82EBA
A82EBA's picture

yep, jim has taken a beating by the trolls at silverdoctors, but overall i believe he has the correct forecasts for the future and he will continue to recieve $110/6 mos from me. bill holter is on the same level in my book.

Sun, 08/23/2015 - 00:13 | 6457133 pachanguero
pachanguero's picture

Here in Thailand everyone wants USD.  Yes I know it's crazy but people are creatures of habit and as the THB gets slapped they run to the USD.

I am long gold and short the THB.  And my cost of living is going down big time.

Last night had a great Pad Thai and drink for $1.20......

Sun, 08/23/2015 - 02:56 | 6457246 hoyeru
hoyeru's picture

yyes but fo the Americans in USA the prices are rising so high, they cant afford to eat at McShitty. A single avocado is 60 cents at the store.

Sun, 08/23/2015 - 03:07 | 6457259 Barley Burnside
Barley Burnside's picture

Reach aroun'.... Four dolla!!!!

Sun, 08/23/2015 - 01:00 | 6457181 damicol
damicol's picture

If only Krugshit would take the stage, or better still a jungle clearing, face painted black, a bone through his nose, adorned in a grass skirt and gleaming white skulls painted on his sweating torso, legs akimbo wildly dancing from side to side his arms flailing around and madly rolling glaring white eyeballs lit by the flames from the fires around him and all set to the sound of doom laden tiger skin drums, whilst shrieking wailing and gnashing his teeth, to explain the benefits of printing presss in the modern economic era.

Just so that we, I  along with most other ZH readers, can more clearly understand his message of course,  then I am certain the Fed would take notice and unleash QE 4 that much sooner.

To save the world of course.

 

 

Sun, 08/23/2015 - 02:59 | 6457250 Barley Burnside
Barley Burnside's picture

Good gawd, that graphic description scared the hell out of me!!! I hope no ones wished that's stuffs on me...

Sun, 08/23/2015 - 05:53 | 6457325 Adahy
Adahy's picture

Sounds like you've been to one of their parites, heh.  I'm not going to sleep well until I get that image out of my head.

Sun, 08/23/2015 - 06:39 | 6457344 monad
Sun, 08/23/2015 - 02:28 | 6457232 monad
monad's picture

blow me

Sun, 08/23/2015 - 02:57 | 6457247 jcdenton
jcdenton's picture

It is more than just a currency that is facing its final dirt nap. It is any fossil, and/or abiotic, or even synthetic petroleum product ..

One does not get to the Moon in hours, and Pluto in days on some joy juice. One does not convert their present automobile into a landspeeder with a combustion engine ..

http://peswiki.com/index.php/Directory:Keshe_Foundation

Sun, 08/23/2015 - 02:59 | 6457249 crashguru
crashguru's picture
... and stupid me always thought the dollar would plunge 25% when its going to die
Sun, 08/23/2015 - 03:05 | 6457251 Deez Nuts
Deez Nuts's picture

Big oil is just another scam that needs to be reigned in.

I WILL classify energy as a strategic commodity and end BIG OIL fraudulent control.

VOTE DEEZ NUTS 2016!

Sun, 08/23/2015 - 03:05 | 6457254 Barley Burnside
Barley Burnside's picture

Vote for "none of the above"... brewsters millions...

Sun, 08/23/2015 - 05:54 | 6457326 Adahy
Adahy's picture

"No Consent" gets my vote.

Sun, 08/23/2015 - 06:45 | 6457334 bunnyswanson
bunnyswanson's picture

Yall need to get to the city council meetings on a local level.  This clip should be watched by everyone. 

Say one thing do another  Agenda 21. 

These people are well trained in brainwashing. 

https://www.youtube.com/watch?v=tElA1J3M1YM

UN Agenda 2030:

Partnership:  "We are determined to mobilize the means required to implement this Agenda through a revitalised Global Partnership for Sustainable Development, based on a spirit of strengthened global solidarity, focussed in particular on the needs of the poorest and most vulnerable and with the participation of all countries, all stakeholders and all people.

https://sustainabledevelopment.un.org/post2015/transformingourworld

Agenda 2030 Corrupt, Castrate, Confuse, Corner, Corral, Cull, Contain, Control, Capitalize, and Liquidate.

Sun, 08/23/2015 - 03:38 | 6457273 kedi
kedi's picture

I often play a little thought experiment. What if there was only one continent on planet earth. For simplicity sake, I imagine North America, minus Mexico and the more northern extents of Canada. So there is less overall temperature variance. The continent has the amount of natural resources, above and below ground as it had when humans began.

I start the thought experiment as if the continent is at a technological and economic level as the U.S. some while after WW2. Humans originated and reached that level on that single continent. So they are a pretty homogeneous bunch. So we all live on one continent. I discard racial and historical issues, but start with the social and economic strata of say the 1950's. There are poor, middle class and wealthy in that era's proportions. It is one country. It has the same levels of government. Federal, State, County, Municipal, etc..... Same constitution, laws, etc....

But there are of course, differences. There is no other country. No other land mass. So the start of the experiment precludes external partners, enemies, trading. It also precludes the population having already killed itself off due to various acts of idiocy.

Some might say it almost was like that for a little while. But I like to wonder, what if it was and would be like that forever. With humans still being humans. In all their glory and frailty.

There is one currency. Aside from the weather, no other external things to blame. Possibly a little more awareness of the limits to resources. Probably a religion, or a few. But they would be pretty well amicable. So I start the experiment out as a pretty nice situation. It is actually well on the road to increasing prosperity for all. Then I imagine how we would go about messing ourselves up.

The experiment includes a big geological difference, but no difference in humans. There is a difference in the racial makeup of the population. They are all very much the same. But the population has all the usual human failings. Greed, sloth, irrational fears, criminal, saint, average Joe and Jane.

I like how this experiment makes it more difficult for certain criminals to practice their craft. External options are absent. They might attempt to exaggerate and inflame regional differences to advantage. But at this point the population is mobile, has spread out from being regional. Peoples roots are quite widely spread. Even now, many would be regional potentates try it.

When I compare this one continent model to the current world. It clarifies how a small number of criminals, use what does not really exist, to keep their prosperous criminal worlds operating. How they take advantage of differences. Create differences. Keep those differences going.

There are people who build ladders. There are people who build piles of bodies.

Right now. There are people who are succeeding, only by hiding or distracting us from seeing, the huge piles of bodies that they are climbing up on top of. It is a race.

One at the top, of nothing but a pile of dead bodies. Or all of us keeping us all alive and well.

Aside from my personal views. The thought experiment is interesting. Using 1950's racially, etc, homogeneous U.S. as a starting point of a one continent planet. Then projecting a future of various sorts.

Sun, 08/23/2015 - 04:28 | 6457287 BurningBetty
BurningBetty's picture

It is an interesting thought. It is when you scale things down that you really start to see the big picture of what is really going on "behind" the scenes. Or rather, it's not really behind the scenes, it just that many can't be bothered looking/searching for imbalances because it becomes to demanding to keep looking for these things in a world with so many factors. Which btw have grown out of an ever increasing number of people. And this is pretty much why the TPTB have an easy time hiding in this pile. The more factors you got to funnel, the harder it gets. Meaning, the main-street guy no longer knows from which side he is being screwed from. Then again, you just need to scale it down and you'll know you are being screwed. That is all that matters. 

In a way, the mathematics have thoughts to focus on the trends and avoid noise. That is all fine but mathematics have never made us able to discern noise from human greed. In a way, the idea of one world government, one currency and total order(like you'd find in an ant colony)  isn't such a bad idea after all. Everything in our universe operates through structural order. Literally, out of chaos comes order. This is the future that has been projected by TPTB and they are obviously doing whatever it takes. The question that comes to mind then is; are humans suppose to be structered or is this where free will seperates us from the rest?

Sun, 08/23/2015 - 08:15 | 6457417 Oldwood
Oldwood's picture

We always know when it's too good to be true, when it is a something for nothing scheme, yet we fall for it again and again. Maybe in a more homogeneous society it would be harder to believe each others lies, but I doubt it. How many who were exposed by Ashley Madison find their spouses in complete shock and surprise. I would bet the vast majority of them knew their spouses were cheating yet they deliberately denied it to themselves and chose to look the other way. This is how our system works, through our own denial, that we know its not real, that it is a false high achieved through a "narcotic trick", but that we can quit any time we want.

Sure.

Sun, 08/23/2015 - 09:06 | 6457469 stopthejunk1
stopthejunk1's picture

You're not much of a sociologist.

People will differentiate themselves. If race or nationality doesn't exist, they'll do it some other way. If no way naturally exists, they'll create one, using bandanas and tattoos if they have to. (Don't forget that race is a sociological construction, not a biological one.)

And the elites will exploit it as usual.

Sun, 08/23/2015 - 10:26 | 6457604 Sparkey
Sparkey's picture

I love thought experiments, the results are always what you think they are!

Sun, 08/23/2015 - 05:01 | 6457304 Debugas
Debugas's picture

the answer is simple:

USD was the reserve currency that means

MOST OF THE LOANS WERE MADE IN USD

and that means today

MOST OF THE DEBTS HAVE TO BE RETURNED IN USD

which leads to the strength of the USD

Sun, 08/23/2015 - 07:45 | 6457393 Jack Oliver
Jack Oliver's picture

The loans won't be REPAID !!! - In US dollars or anything else ! The FED has printed 15 TRILLION since the FAKE GFC  and 'lent' it out to FOREIGN banks !! REPAID ??? The money was COUNTERFEIT to start with !! - LMAO ! 

Sun, 08/23/2015 - 05:31 | 6457309 buzzsaw99
buzzsaw99's picture

Complicating matters is a looming Fed hike...

thanks for the laugh.

and paradoxically, mostly as a result of the actions of none other than the Fed itself, with its strong dollar policy...

again, thanks. that is beyond funny. zirp fueled speculation gave a false market signal which led to overproduction which is the opposite of what is written above. do you see what happens larry?

Spegel acknowledged that the net withdrawal was small...

that would be my point. japan, the eu, and china, along with levered buybacks moar than compensate for puny selling by oil producers. nobody sells assets in bulk, not the fed, not foreign entities, not pension funds, not now, not ever. to attempt to do so would make one a pariah.

the death of the petrodollar will only come when dollars won't buy oil. paradoxically that will be caused by the fed and the fed gub through their gross mismanagement of the greatest scam in human history aka the usd.

Sun, 08/23/2015 - 07:56 | 6457311 falak pema
falak pema's picture

How the petrodollar died and nobody noticed...

I beg to differ. I did notice it and said it was the mother of all current conflicts since GWB's Crusade made the OIL patch centrepiece to US big stick strategy. The Bush-Saud nexus, a glimpse of which was Carlyle private capital,--employing all the tops guys of US/EU Oligarchy-- was a sign of that Uber collusion between Oligarchy petrodollar capital, reposing on the Massive Military Mantra of Reagan's day defense spending ramp up.

It iconised the financialised, outsourced, surrogate, global construct erected by US Oligarchy, in NWO "towering like a colossus" hubris after collapse of rival superpower, the USSR.

And now the Obama administration has got COLD FEEt about the new Frankenstein they have spawned with ISIS cum Sunni tribe (ex Saddam army veterans), just like the Old Frankenstein GWB spawned in Afghan called Al Qaeda. The hubris of imperial plays makes Caesar fall for the same false premise : they won't DARE! 'Cos we own them.

After 5 years of head up ass two and froing this Obama Administration hijacked Arab Spring in Libya by making it into an Iraq type play against Q-daffy, similar to GWB's Saddam bashing; further extended by a hasty cut and paste job -- in "we came we saw he died" hubris-- to import it  into Syria against Assad (using Benghazi elements and arms as new "liberation" type front made up of rabid Islamists); all with the consent of Gulf kingdoms who financed the Libyan muscle play executed by USA/UK/France big stick.

Resistance in Syria by Russia and Iran's support has made that Sunni divide and rule stategy backfire bigtime ONE MORE TIME. The US admin. cannot support it by a boots on ground repetition of Operation Desert Storm.

Now the Obama regime tries to appease rising local power Iran; all the while using Erdogan on Sunni front to balance Iranian Shia power; hoping thus to isolate the ideological excesses of Wahhabism now gone viral in jihadist support, apparently "under the carpet" but a growing regional cancer.

Some conundrum! Which has knee jerked Saudi Ire and backlash to express itself in Oil price wars, to make "renegade" USA pay where it hurts : in its own financialized home Oil patch. The Sauds know the debt conundrum  of US. They also know their future markets are more and more in Asia rising.

So the shifting fortunes of US foreign policy are now "up the creek", its head buried in Arabia's sandy, dystopian reality, and the chickens are coming home to roost about what Saud and other monarchies see as this administration reneging on the FDR/SAUD handshake that started this whole ME oil patch game under US military umbrella.

The THREE strategic threads of "US exceptionalism and Great game" are now distending : the Gordian knot of tying big stick, the oil monopoly and the Fiat "our money your problem" construct, engineered by Dear Henry, is now coming unstuck; fragile like a house of cards.

So petrodollar's reign now looks like ending. It was evident back then in 2003 when the Crusade began that it would end like those other Crusades of GWB's ideological ancestor in "clash of civilization" resurrection, identical to the mindset of Saint Louis's failed Crusade. It ended badly then as eventually the West lost both Holy land AND Constantinople. History rhymes for those who study it.

Only this time its not about the spice and silk routes; its about oil; the TRUE CAUSES around which the sham curtain of "clash of civilization" is woven time and time again. Its always about MONEY and POWER, never about GOD.

Humanity always uses these false paradigms of "Gods wills it" to justify its greed to colonise foreign territories.

Human nature never changes.

Yesterday's timeline showed us  the fall of Frankish power, then of Spanish MAin, then Napoleon's march all dressed in purple to Moscow, then of Rule Britannia's "white man's burden" sleight of hand;  all for the same true CAUSES of greed and hubristic mindset.

Now it looks like Pax Americana's turn.

The solution for world lies in new paradigm; but we have nobody capable of building it until this past one collapses.

 

Sun, 08/23/2015 - 08:32 | 6457432 Oldwood
Oldwood's picture

Much of what you say it true. Each successive administration believes they can use limited military as a lever with their ever growing hubris of "intelligence" to manipulate their way to advantage. They have also managed to use the military in such a way as to diminish its credibility, while believing that their "intelligence" will prove superior. We see this through constant negotiations, secretive alliances and "agreements" that only further weaken us while also shrinking our military's capabilities physically and morally.

The perfect storm is on our horizon. We can speculate as to who driving this and why, but the most important thing of the moment is how and will we survive. It is important to understand the causes, but at this point it must take a back seat to preparedness.

Sun, 08/23/2015 - 09:13 | 6457475 falak pema
falak pema's picture

For those at the bottom end of the social pyramid the best answer on survival is local area networking. Keep away from banks and large sized schemes as they won't work. Trust is what is lacking in these global constructs.

Think local, think self sufficiency in terms of essential, have friends in your community. And try and understand what the motivation of the big players are to AVOID the pitfall of being "fall guy" of their scams.

Understanding is important as the logic sequence for all who believe in "free will" and liberty is to follow the right methodology of all decision making : WHY are we here? What's the solution? How to achieve it? Who are the key lead players in an alternative construct.

WHy, What, How, Who...that should be the methodology of all alternative strategies.

Sun, 08/23/2015 - 09:41 | 6457524 negative rates
negative rates's picture

Yet the Fed keeps looking for a greater fool, when IN FACT, they are the greater fools.

Sun, 08/23/2015 - 11:01 | 6457662 Sparkey
Sparkey's picture

Good enough Falak, as far as it goes, the error you and every other commentator makes is; This didn't start in 2003 it started on Jan. 16 1991, that was the begining of 'The New World Order' as Proclaimed by President Bush, in the 'New World Order' the rule of law was to prevail, and no country was to be allowed to keep land 'Taken by force' this sounded good to people and basically the Whole World offered symbolic support for Gulf War 1!

After the war was won there was no need for anyone to give back anything, and even President Bush Sr. who had made these promises to the World was an imbarrassment who had to go, replaced by Pres. W. J. Clinton, to his credit W. J. or Slick Willie to those who don't like him, cobbled together a compromise solution, far less sweeping than what  Bush Sr.had alluded to, still with enough consessions that the weaker party was willing to accept it, however even this was too much for the most powerful player who used assination to kill the deal, here we are 24 years later, conflict is Metastistizing, and there is no more talk of a 'New World Order' based on Law, the next Order, alluded to, will be based on Military Power, Welcome to our "Brave New World"!

Sun, 08/23/2015 - 11:25 | 6457698 Haager
Haager's picture

Just two things: It's not even really started, and: How long did it take for you to realise the truth?

Sun, 08/23/2015 - 12:31 | 6457814 falak pema
falak pema's picture

If you read my posts here you would realise that I date the MINDSEt change with JFK's murder in Nov 1963. Jim Garrison was right. The death of a President was the prologue to dystopia (oligarchy's soft fascism), as well the epilogue to Keynesian demand side welfare state age. The hippie movement epitomises the latter sentiment as the US goes MIC run bigtime.

Its the Vietnam war that sets into motion the time line of Pax Americana IMPERIAL construct in asymmetric wars, the ARMS bazaar MIC ramp up age, post-Cuba head to head MAD stalemate with USSR as rival superpower.

After that, the US Oligarchy just keeps going down that road and their mindset keeps hardening towards Caeserian options forgetting their allies and getting more and more inward looking  and hubristic.

1° JFK's Murder.

2° Nam War and Great society spend.

3° 1971 BW revoke as US becomes net oil importer (peak US oil)

4° 1973 petrodollar. Dear Henry's ME shuttle diplomacy and China ping ponging. Saud now totally a mIC controlled satrapy providing the strategic RM to West and Japan. ME Oil the new spice of industrial life and Egypt's Canal a US highway after Nasser's demise. MIC control of Iran and Saud makes US's petrodollar the life line of all commodities commerce and financial derivative plays (Chicago futures exchange).

5° Second Oil crisis and Iran revolt leads to Reaganomics and Thacherist City TINA financial construct and welfare state destruction. WS becomes supply side Casino.

6° 1986/1987 Reagan uses Plaza and Louvre monetary accords to put Japan in straight jacket and FIRE economy tailspin.

7° 1989 USSR collapse. The Saud Oil spigot open obtains that. NWO now begins with Iraq I Desert storm to punish Saddam who fails in his Iran conquest and wants Kuwait as payback.

8° Clinton era 1994 ensures WS/Squid supremacy and Greenspan's ZIRP starts shadow banking bigtime to allow US oligarchs to use China as production base subsequent most favoured nation status.

9° Clinton 1999 Gl-St revoke makes Investment banking king of retail banking. The Squid runs American finance and the WWW allows the Banking network to go global.

10° 2001 Its Al Qaeda payback. and Tech bubble; concomitant signs of US hubris running into overheat. China now opened totally to export to USA as world factory thanks to WTO membership.

11° 2003 GWB Crusade sets the OIL planet in motion as USA says "you are all part of NWO oligarchy provided USD is your money in global plays". Carlyle type private equity funds go global. US destroys Sunni equilibrium and allows Iran to become beacon of resistance.

12° Oil hike and USD pump and dump lead to 2008 Lehman collapse. Crisis of world capitalism. And Pax Americana becomes Titanic.

13° We all come to ZH to follow the story here.

Sun, 08/23/2015 - 06:01 | 6457331 Kyddyl
Kyddyl's picture

Kazakstan is a not so vaguely radioactive, toxic waste site that may have a puddle of oil and does grow lots of cannabis, poppy and ephedra. It has a large portion of its border with Russia and has many historical ties with Russia. Among recent border disputes the creation of a seabed boundary with Turkmenistan in the Caspian Sea remains under discussion; Azerbaijan, Kazakhstan, and Russia ratified Caspian seabed delimitation treaties based on equidistance, while Iran continues to insist on a one-fifth slice of the sea. The "petrodollar" is dead as is the US$ Reserve Currency status, and the evaporation of the tenge is well planned. This is really about Russia (which is relatively debt free), China, Iran and the way things are going to work in the very near future in the US. May I also remind some folks that the US was on the gold standard during the last Great Depression? Gold is representational, but real, tangible, useful assets carry alot of weight, especially when represented by gold. During the Great Depression the US mid section obsessively grew too much wheat while in the east manufacturing and in the west other produce still made money. It really isn't about the US anymore as all we have to offer is war and death around the world and we're about to be served withered, bitter herbs for dessert.   

Sun, 08/23/2015 - 06:11 | 6457332 Raoul_Luke
Raoul_Luke's picture

This is all pretty complicated.  Am I correct in surmising that the "petrodollar" referred to in this article is basically synonymous with the "Eurodollar" Jeffrey Snider has been referring to?  It seems like they both are describing basically the same scenario, but with a slightly different perspective and the different names for what I perceive to be the same thing - dollars outside the US economy.

Sun, 08/23/2015 - 06:14 | 6457333 CitizenPete
CitizenPete's picture

Lets see.... USSA completes the largest Military Industrial Complex sale in world history with Saudi Arabia, equipping them with mostly offensive war tools (not just defensive radar and SAMs)   Then partly due to demand from a pause in global entropy, but mostly due to increased global production, the price of oil is driven down toward $40/bbl. Illusions of spanking Putin for defending Assad and blocking the gas lines through Syria (ond the Black sea pipeline, etc. etc.) aside, perhaps all is going according to plan?

 

So someone explain to me: Since Kissinger et. al. put together the Petrodollar scheme to back ze dollar (as Nixon announced the end of Gold backing), all these fiat credits have been produced and circulating, making the FRN the toilet-paper of choice for every third world grease spot on the planet.   So if oil production is up yet the use of the FRN denominated oil trade is down (via bilateral FX exchanges/trades, whatever the reasons) then those dollar credits in circulation have to roost somewhere -- right?  It the money flow has slowed them they come home to roost, don't they?

So my question: has the Petro-dollar liquidity (flow) morphed into Petro funded-QE liquidity as all the credit no longer being used for FRN denominated energy trades find new crevasses to flow into?

 

All part of the plan -- more stealth QE.

Sun, 08/23/2015 - 08:57 | 6457454 stopthejunk1
stopthejunk1's picture

You guys remind me of Sunday-morning preachers. You have a fixed vocabulary palette, a set of dogmatic talking points, and then you riff and improvise on them (sprinkling in conspiracy theory, daily news items, etc.) and it sounds slightly original or thoughtful to someone who hasn't heard it before... but in reality, you all sound the same, right down to the "Amen!" claque in the back row.

Sun, 08/23/2015 - 07:18 | 6457375 EurGold
EurGold's picture

500 x 1oz Silver Vienna Philharmonic Master Box €7,159.69

https://www.eurgold.eu/silver/500-x-1oz-silver-vienna-philharmonic-2015-...

Sun, 08/23/2015 - 07:23 | 6457383 EurGold
EurGold's picture

500 x 1oz Silver Vienna Philharmonic Master Box €7,159.69

 

 

https://www.eurgold.eu/silver/500-x-1oz-silver-vienna-philharmonic-2015-...

Sun, 08/23/2015 - 07:47 | 6457390 Jack Oliver
Jack Oliver's picture

'Obama the Gay' is in the White House - His 'wife' is a TRANNY - He was not 'placed' there for nothing ! Billed as the greatest 'Orator' in political history - Obama's job is to 'usher' in the NWO - Will we have the Western version OR the Eastern version ?? Whichever way it goes , you can be sure the people will be 'herded' in that direction - courtesy of BIS who ultimately are BEHIND everything !

Sun, 08/23/2015 - 07:53 | 6457402 ToSoft4Truth
ToSoft4Truth's picture

The Devil is going to get you! 

Sun, 08/23/2015 - 08:07 | 6457412 Atomizer
Atomizer's picture

Senior Obama Official Says "We Are Going To Kill ...

This breaks down in more detail. IMF is going to add Yuan to SDR Basket. 

"We'll Kill the Dollar!"

http://m.youtube.com/watch?v=_F7bM63ZfWQ

Sun, 08/23/2015 - 12:26 | 6457843 holdbuysell
holdbuysell's picture

The source of that statement, Kyle Bass, can be found here:

An Hour In The Company Of Kyle Bass

http://www.zerohedge.com/news/2012-12-19/hour-company-kyle-bass

https://www.youtube.com/watch?v=JUc8-GUC1hY&feature=youtu.be

Sun, 08/23/2015 - 08:46 | 6457437 Last of the Mid...
Last of the Middle Class's picture

Always, always QE moar before you lose control of commodity prices. Stunning incompetence of the 1%. Too many plates to balance at one time in "the show" I guess. Oh well, it was a nice country once.

Sun, 08/23/2015 - 08:50 | 6457440 ella
ella's picture

Tyler,

 

Using Firefox as usual but unable to read the text on the page because the ads from the left side of page is covering the text.  

Sun, 08/23/2015 - 08:52 | 6457444 stopthejunk1
stopthejunk1's picture

Disable javascript. No ads, no problems. (Also a Firefox user.)

Sun, 08/23/2015 - 09:15 | 6457479 gwar5
gwar5's picture

....or, download adblock. It's free.

Sun, 08/23/2015 - 09:34 | 6457510 A82EBA
A82EBA's picture

Adblock Plus works for me

Sun, 08/23/2015 - 08:51 | 6457441 stopthejunk1
stopthejunk1's picture

1. The "summary" of the article really has nothing to do with the petrodollar.

2. If the petrodollar is dead today, then either it never existed, or it never mattered.

3. A strong dollar is good for the rest of the world, since everyone wants to export to the U.S., which is still the world's largest and most affluent consumer market.

4. It didn't matter 18 years ago and it doesn't matter now.

5. The dollar isn't going anywhere anytime soon. And even when it does, it will be replaced by something (SDR or etc) that carries out exactly the same functions in the same way.

6. "A myth is a fixed way of looking at the world which cannot be destroyed because, looked at through the myth, all evidence supports the myth." (Edward De Bono)

The doomsday artists will always be entertaining, but they have never been right. There will always be booms and busts, but saying so isn't prophecy -- in fact, it isn't even news.

Sun, 08/23/2015 - 14:07 | 6458155 Atomizer
Atomizer's picture

US Political figure heads have reached debt saturation. 

Sun, 08/23/2015 - 09:09 | 6457452 QuickFrozen
QuickFrozen's picture

What has Borat Sagdiyev think about this?

Sun, 08/23/2015 - 08:56 | 6457453 Last of the Mid...
Last of the Middle Class's picture

I'm ready for some sub $1/gallon gasoline. Big block here I come. Piss on that eco boost shit. Damn if Ford didn't see that coming. Supply and demand motherfuckers, the ultimate equalizer, other than colt.

Sun, 08/23/2015 - 09:39 | 6457520 A82EBA
A82EBA's picture

i dont drive all that much but my 200hp outboard at 4 mpg gets a lot more runtime now with gas at $2 handle

Sun, 08/23/2015 - 08:59 | 6457457 OutaTime43
OutaTime43's picture

So, what can realistically replace the US dollar?  Just look around at potential replacements..   Euro? They are barely hanging on with Greece and other southern European countries in collapse.  Yuan?  Currently pegged to the dollar and the reserve currency must float in the markets and be attached to a net debtor nation in order to function. China would also never risk their export driven economy by risking a strong currency.  Any others? The Swiss Franc?  Gold ?

Seriously, there are no realistic replacements and the world knows it.

Sun, 08/23/2015 - 09:04 | 6457464 Monetas
Monetas's picture

Petrol Dollars .... great name .... and I´m getting a lot more Petrol .... for my Dollahs .... what´s to be wringing your hands over .... my little consternated socialists ?

Sun, 08/23/2015 - 09:18 | 6457478 Monetas
Monetas's picture

Mexican futures market play .... put a 20% lay-a-way down payment .... on an Italika scooter .... at the Elecktra store and bank .... still priced in 14 to 1 pesos (now 17 to 1) .... and pay it off when the peso is ? to 1 .... some joke 25 to 1 .... BTW, the Elektra bank sells Mexican silver and gold coins ... I´ll have to ask .... if they do lay-a-way on coins .... prolly not !

Sun, 08/23/2015 - 09:20 | 6457486 roadhazard
roadhazard's picture

The US dollar ain't going anywhere with China and Russia going down the tubes way faster than the US. There is no country or basket of countries able to pick up the slack. The dollar will remain strong as long as it is the supposed safe haven in a falling world currency market. The dollar will be the Last to go.

Sun, 08/23/2015 - 09:44 | 6457533 A82EBA
A82EBA's picture

im saw the dollar index 100 dma turned down recently. schiff says 93.50 is key support

Sun, 08/23/2015 - 09:32 | 6457505 Manipuflation
Manipuflation's picture

You guys forgot all about Russian and Putin but I never forget when there are coins involved.  What should have been easy for me was NOT easy but I finally came up with ONE WHOLE SET (two coins) that came from directly from Crimea.  That is calling in some favors I would say just for that original Russian mint set.  That is a piece of history for more than one reason.

I gave the person who brought it a 1946s Washington Quarter.  I graded the coin out and could find no way other than MS-60 AT LEAST.  That was my first ever grading at MS-60.  I have 20 more so no big deal but that is a nice coin to have.  Fair trade for that.

Now to come up with that HUGE Putin silver round.  Have any of you ever seen one?  Does anyone here own one?  How did they mint that?  Inquiring minds would like to know because the ATB's proved to be a hell of challenge for the US Mint.  The US mint still seems to function and they make some very nice things.  Probably not as good as Canada though but there is consistency.  If you really think about it for a while you start to recognize who great it is that we can still buy bullion.  Come on think about it.

I Russia you can't just go buy bullion like we can.  I have been on this shit since I first met who was to become Mrs. M.  You would think that Russia would do a better job with their mint considering their resouces but I guess it is impossible.  I guess that is their deal.  They are just not going to make very much of anything in terms of bullion coins.  Russia should let their citizens accumulate wealth by being able to stack PM's but that does not happen in Russia.  I have had some pissy fights over the raw deal they are getting because WOW.  Even China has an export mint that makes nice coins.  Russia?  Fuck no!  Maybe that is smart but come on.  How about a Siberian wolf coin?  Canada already did that but that was a Canada wolf.(great coin)  I don't care who the they put on the obverse.  Putin is fine if they want to do that.

Getting any metal out of Russia is not easy to do.  They have no idea of their own monetary history.  Otherwise they are extremly intelligent folks.  I have Russian coins that Putin has never seen.  The Russian/Ukranian person who brought me these last two coins had never seen some of what I have.  That is not me saying that it is going to be a great investment.  To me, the looks on their faces are priceless because I don't deal in junk and they know it is real.  They are not sure how deal with this Merican.

Monetary history destroys nationalism.     

 

Sun, 08/23/2015 - 09:40 | 6457522 FredFlintstone
FredFlintstone's picture

if 1000 oz of silver came in the back door of a russian mint, maybe only 500 oz would come out as coins? when does golf season end in Minnesota? couple of weeks?

Sun, 08/23/2015 - 10:25 | 6457601 Manipuflation
Manipuflation's picture

Golf season ending?  Naw, not for two more months.  I played one time this summer and I work at one of those nice golf courses.  Not so much time for golf for me.

But hey, it is time for an audit of the coins.  I just found an 1856 Liberty Seated dime in my collection.  That was from my brother.  I think he was trying to tell me something.  I will buy the whole nine yards of silk and the all of the coins if I see them.  That is the issue, you just can't go out and find these coins anywhere.  My brother already button hooked me into the Liberty Head nickels and I do have an example of the 1885.(you can read the date)  I already know that all of you, save one, do not have that coin because you won't get that one out of a candy machine.

Anyone have a tube of 1916d winged liberty head dimes laying around that they don't want?  I will give you ten dollars per dime.  

Sun, 08/23/2015 - 10:26 | 6457607 FredFlintstone
FredFlintstone's picture

i sold most of my coins (small collection) back in 2011. silver, wheat pennies, old nickles.

i thought summer lasted a month up there.

Sun, 08/23/2015 - 13:36 | 6458050 Manipuflation
Manipuflation's picture

Audit complete: as far as she knows.  I am fine.

Sun, 08/23/2015 - 09:44 | 6457534 exartizo
exartizo's picture

very well written article with insightful analysis. nice job Tyler(s)

Sun, 08/23/2015 - 10:08 | 6457570 Son of Captain Nemo
Son of Captain Nemo's picture

Can't happen soon enough...  Let's fucking get it over with!

By the way... Great picture! Might as well put a camel inside a six-sided star where Washington's head use to be!!!

Sun, 08/23/2015 - 10:09 | 6457575 JamaicaJim
JamaicaJim's picture

I was THINKING of going short the Tenge.....damn!

Sun, 08/23/2015 - 10:10 | 6457578 MEFOBILLS
MEFOBILLS's picture

I scanned the ZH posts, and no mention of the 73 Kissinger Saudi agreement.

One cannot understand the petrodollar wtihout understanding this agreement.  Tylers...you also didn't mention it.  

The fith fleet is in Bahrain for a reason.  It is there as part of the agreement, to power project and gurantee transhipment and market protection.

In other words, getting oil to market allows oil to convert to money, and this money then buys goods.  

The Saudi's do not make anything.  They have no real natural resources.  They need money they can spend on the world market, and right now that is dollars.  Saudis need goods and dollars to also satisfy the tens of thousands of princelings that are sucking on the petrodollar tit.

The Saudi's also get AWACS, front line fighters, and probably anything they want if they ask for it.  The deal:  Saudi's are to recycle their petrodollars into dollar markets.  They are not to have their own large credit issuing bank.  

Think about it.  The Saudi's could have stored their dollars, yen, pounds, rubles, etc. in their own bank and then become a finance powerhouse.  But, they do not engage in high finance, that is left to Jewry and financial centers in London and Wall Street.

It is no accident a Zionist Jew,  Kissinger wrote the agreement with Saudi.

There are critical chokepoints to the flow of oil, and the region depends on the dollar/market/military nexxus.  

Chokepoints are Suez Canal, Bab al Mandeb, Straits of Hormuz, Straits of Tiran (Israel).

Don't expect the Saudi's to go off of dollar denominated Oil pricing anytime soon.  Other nations not benefiting from Petrodollars will shift, but the core middle east region will not.  The only way they will shift is if another sugar daddy can give them military protection, gurantee transshipment and market access.

The 73 agreement also sanctioned OPEC monopoly cartel, and sanctioned Saudi Wahabbism.  The Saudi leaders came into power in a coup.

That the cartel is breaking up due to other nations oil pricing is not part of the agreement; america has no responsiblity to force others to price in dollars.

One thing that ZH readers and others seem to always forget is that money is law.  Behind law is force.  A strong military presence is no accident.

The petrodollar scheme is being shaken up, but fundamentals are still in place.

I didn't make up reality, sorry.  There is no getting around the fact that force is involved.  After American Civil war when South fell by losing (to force), their money was worthless.

 

 

 

 

Sun, 08/23/2015 - 11:06 | 6457629 Son of Captain Nemo
Son of Captain Nemo's picture

Well done MEF.

Great summary of "how" we got here 42 years ago and "why" this will end badly for everyone that signed up to it!

We can only speculate now what might have happened if France, Germany, Spain and Italy finance minister(s) went public with a deal to purchase Iraqi oil in Euros vs. the petrodollar in 2003!...

Wonder what George W., Tony Blair and Bibi would have done if they had heard very public statements that Western Europe no longer would be beholden to purchases using their currency and instead using their own???!!!

One can only speculate in hindsight that Iraq would have been spared the invasion, but something tells me that the cabal would have been instrumental in a casus belli that would have dwarfed "9/11" two years earlier to keep the stable in check!

Sun, 08/23/2015 - 10:31 | 6457615 Dr_Snooz
Dr_Snooz's picture

The biggest effect of the petrodollar was to artificially raise the value of the USD versus every other currency in the world. So if the petrodollar is dead, then why is the USD rising EVEN MORE? If everyone is trying to get away from the dollar, it should be falling. Instead, it's rising. How do we explain that?

Sun, 08/23/2015 - 13:09 | 6457886 MagicMoney
MagicMoney's picture

Petrodollar is obviously not dead. USD is rising based on the assumption that the US economy is doing fantastic against the rest of the world with the possible rate hike being validator of a recovered economy. USD started to rise substantially since July, 2015 all the way to today. This is a hallmark of a confidence mini-bubble building up to the  September Fed rate hike. At least Peter Schiff seems to think so. Currencies can form bubble-like mentalities of confidence. The markets overvalue a currency, then reality hits, currencies plunge once again to their corrective values. If the Fed fails to raise rates, then the USD will decline. If the Fed does raise rates, then it has to do so in a manner it does not create a decelerating economy. Fed is in a corner. They don't want to raise rates, but feel they have to. Their ambigous economic goal posts point much to this.

 

 

http://www.tradingeconomics.com/united-states/currency

 

 

Also emerging economies are under pressure from low commodity prices which stem from slowing of global growth. This doesn't mean the petrodollar is finished, I think petrodollar will be finished for other reasons that are directly tied to the Fed and US government as opposed from declining prices. Afterall the petrodollar is really a product of reserve currency status.

Countries are depegging their currencies from a rising USD to deal with each other.

Sun, 08/23/2015 - 10:33 | 6457619 MEFOBILLS
MEFOBILLS's picture

When will a new sugar Daddy emerge?  That is the real question.

 

Eurasia is forming and part of that formation includes BRICs money system and PIPELINES.  

 

Pipelines are not SHIPPING.  Therefore, naval power projection becomes diminished in importance.  A LAND army and is ability to protect its markets, energy, and minerals becomes much more important.

Middle east will have to join Eurasian pipeline system in order to get their oil to markets,  Once their oil is in markets it can convert to money to then buy goods.

People of the middle east, do not have in their earth, those things needed to fashion goods.  There is a genetic component too, in that they are Semites, a racial type that has shown itself not the best at art, or imagining new inventions/goods.  Some of them are very good at mathematics and science, but that does not necessarily translate into Engineering and technical know-how.  This is most likely due to their high fraction neanderthal genetics, upwards of 30%. (People from warm climates should be selected to NOT BE HAIRY, yet these Semites are, indicating their genetic roots are not evolved in that region. They also have prominent Neanderthal features.)

They will always need to import technical people from around the world, as only a tiny fraction of their population is capable.

Sun, 08/23/2015 - 11:22 | 6457691 Chuck Knoblauch
Chuck Knoblauch's picture

How many oil wells do the Rockefellers control in Iran?

Zero.

How many banks do the Rotchilds control in Iran?

Zero.

Sun, 08/23/2015 - 11:31 | 6457692 Son of Captain Nemo
Son of Captain Nemo's picture

People of the middle east, do not have in their earth, those things needed to fashion goods.

You lost me on that one.  Everything Western man owes to the pillars of science and mathematics comes from the origins of the Middle East, modern day Iraq (architecure, literature and art)  Egypt (Ghiza and Luxor)Syria, Jordan all contributed with brilliant engineering marvels long before the Romans.

Down voted you on that one sir.

If you had singled out the Anglo-American lap dog that is Saudi Arabia I would agree. They were the late generation inbred 5th cousin the rest of the Middle East ostracized and banished to the desert and  just happened to be the "low hanging fruit" the English and Americans needed to exploit when the oil business came into focus!

After I read what you put in to words I had to ask myself if you were one of those transplants from Eastern Europe that made   31.7833° N, 35.2167° E their home but now tell us it's somewhere in Ukraine!

Sun, 08/23/2015 - 11:24 | 6457656 Chuck Knoblauch
Chuck Knoblauch's picture

China is buying/selling Iranian oil for Yuan.

Why don't the Iranians shout death to China?

Think for yourselves imbeciles.

Who controls the banks and oil wells in Iran?

 

Sun, 08/23/2015 - 11:40 | 6457742 divedivedive
divedivedive's picture

Could someone help me understand Figure 12 above ? Is it pointing out that Oil is 1.06% of Mexico's GDP or is it pointing out that due to lose of oil revenues Mexico's GDP has fallen 1.06%, or something else ? Thanks

Sun, 08/23/2015 - 11:47 | 6457757 Chuck Knoblauch
Chuck Knoblauch's picture

It's irrelevant.

GDP is a fiction.

Sun, 08/23/2015 - 11:39 | 6457744 VW Nerd
VW Nerd's picture

Wall Street & London  banks, big insurers and US oil service companies have benefitted the most over the decades that oil has been traded in dollars since all transactions had to be cleared through the money center banks.  The banks got their devils cut through fees and exchange rate spreads.  Without the petrodollar arrangement, our heads of state can no longer dictate that the oil producing countries use our banks, insurers, construction and oil service mega corporations.

Sun, 08/23/2015 - 11:50 | 6457763 Chuck Knoblauch
Chuck Knoblauch's picture

It explains the attacks on China.

No SDR and 2 explosions in 2 weeks.

Let's see what happens this week.

Sun, 08/23/2015 - 14:03 | 6458135 Atomizer
Atomizer's picture

IMF releases report in September. 

Sun, 08/23/2015 - 15:13 | 6458409 earleflorida
earleflorida's picture

Kazakhstan [12/16/91-- sovereignty 23yrs] <USSR>      http://en.wikipedia.org/wiki/Kazakhstan

Turkmenistan [10/27/91-- sovereignty 23yrs] <USSR>    http://en.wikipedia.org/wiki/Turkmenistan

"Don't ask for Whom the Bell Tolls in Kazakh steppes"   by M.K. Bhadrakumar  8/21/15           http://atimes.com/2015/08/dont-ask-for-whom-the-bell-tolls-in-Kazakh-steppes/  

 

"Reshuffling Eurasia's energy deck -- Iran, China and Pipelineistan: Escobar"   by Pepe Escobar  7/31/15              http://atimes.com/2015/07/reshuffling-eurasias-energy-deck-iran-china-and-pipelineistan-escobar/

think*:: Turkmenistan/Kazakhstan geography?,... and what mother Russia could offer...[?] 

Sun, 08/23/2015 - 21:54 | 6460066 JOHNLGALT
JOHNLGALT's picture

GOLD. The last man standing_JOHNLGALT.          By the way WHO IS JOHN GALT?

Sun, 08/23/2015 - 23:17 | 6460449 MEFOBILLS
MEFOBILLS's picture

With regards to people of middle east, they are not all semites.  The Toxic lozenge, or gateway extends down from the black sea downard.  Migration routes of neanderhthals were also across mountain tops all the way to France.

We are all inbred to some degree.

Not all middle easterners are high fraction, for example Persians, who have language and genetics more closely related to Western Europe.

With regards to math and science, 'thal's were known to mark everything down as numbers, and this is why the zero and higher mathematics probably come from this region.  

The lack of art is also noted, and their art tends to be geometric patterns.  Their religions are always abstract God in the Sky, and there shall be no graven images... no images because they cannot carve or paint.

This lack of imagery or ability to manipulate objects translates into an inability to fashion weapons and engineer.

The great engineering feats were never done by these people, only science.  Only after the muslim conquests of other peoples did engineering enter into the mix.

Sorry I down-voted your down vote.

The region indeed is short of iron ore, wood, and other things needed to make goods.

Mon, 08/24/2015 - 00:39 | 6460746 hedgiex
hedgiex's picture

For the Here and Now, $ is still the global medium of exchange for lack of an alternative. It drives the global liquidity needs and becomes larger store of values in $ vs the rest of the currency. Collapsing commodity prices (outside of Oil) is due more to excesses in the past than the present deficient demand (mainly from China). This is not the time to hold store of values in commodity backed currencies or the underlying commodities. While the Petrodollar Structure is collapsing due to increasing difficluties in compeling compliance, this collapse of the Old can just morphed into a new Regime that does not necessarily mean the death of the $. In fact pegging to the $ may well be to the long term benefits of these Commodity exporters as they capture some benefits from the $ hegemony. (They do not have soft infrasrtuctures in place to inspire confidence in their currencies and other paper assets in the global markets).

When you breathe the polluted air of the US Economy, you have to peer through the Smoke to see that the gulf between the collapsing developed nations and the EM is widening i.e. far greater descent volatility in EM nations with no soft infrastructures to capture the void left by US aided by much more corrupt Elites and the better ones with crippled Private Sectors. Free falls of EM Currencies, bonds, equities and commodites are not linear to deficient demand or the Fed's $ tsunami. 

 

Do NOT follow this link or you will be banned from the site!